unit 8 “money”
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Unit 8 “Money”. I. Three Uses of Money. Medium of Exchange Any object that is accepted for goods and services Barter - w/o money, trade goods and services are traded for others. Unit of Account Means of comparing the values of goods and services Store of Value - PowerPoint PPT PresentationTRANSCRIPT
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Unit 8 “Money”
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I. Three Uses of Money
A. Medium of Exchange1. Any object that is
accepted for goods and services
2. Barter- w/o money, trade goods and services are traded for others
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B. Unit of Account1. Means of comparing the values of goods and services
C. Store of Value1. Money keeps its value in two forms: currency (bills and
coins) and deposits (pay debts, convert to currency)2. Interest- cost of borrowing money
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3. Inflation- value of money goes down, prices go upa. Determined by the Consumer Price Index (CPI)-
change in prices of essential goods/servicesb. Deflation- value of money goes up, prices down
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II. InsuranceA. Insurance is essentially a
bet between you and the insurance company
B. Costs1. Premium- sum of money
paid to the company for insurance
2. Deductible- expenses you must pay before insurer will cover expenses
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III. CreditA. Credit- loans, credit cards,
any deferred paymentB. Four Cs Creditors look for
1. Capability- ability to repay debt
2. Capital- income or money in the bank
3. Character- willingness to repay debts
4. Collateral- property to secure a loan
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C. Credit Cards1. Form of revolving credit, borrow money on
an ongoing basis2. Monthly payments based on interest rates3. At minimum payments, takes a long time to
get out of debt
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First Look: Inside the FedThe Fed Bureau of
Printing & Engraving
U.S. Mint Cool Factoids
What is it?
How does it help the US economy?
It’s role in the aftermath of 9/11
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Unit 8“Federal Reserve System”
National Geographic https://www.youtube.com/watch?v=_1NNEgmNc8k‘Eye of the Storm’ http://www.youtube.com/watch?v=ziwut6qm7F0
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I. Creation of “The Fed”
A. Federal Reserve Act of 1913- created the Federal Reserve
1. After getting off gold standard, needed federal bank to respond to economy
B. Purpose is to lend money to other banks in time of need
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II. Structure of Federal Reserve SystemA. Board of Governors
1. 7 directors, include Chairman (Ben Bernanke)
B. Twelve District Reserve Banks
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C. Regulating Money Supply1. Monetary Policy- actions Fed takes to
influence level of GDP (value of economic activity in the country) and rate of inflation
2. Reserve requirement- amount of money banks must keep in Fed banks as a reserve
3. Prime rate- rate of interest for short term loans (to good customers or other banks)
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4. Discount rate- cost of borrowing from the Federal Reservea. Reducing the rate- encourages banks to borrow
more money so they lend more to other peopleb. Increasing the rate- slows down economy by
discouraging borrowing
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5. Fed Policiesa. Easy-money policy- reduces rates, lowers reserve
requirement, prints currency= more money in economy
b. Tight-money policy- increases rates, raises reserve requirement= less money in the economy
Be the Fed Chairmanhttp://www.frbsf.org/education/activities/chairman/
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Other Fed Business Automated Clearing House (ACH) -an
electronic network that processes electronic debits & credits Direct Deposits: payroll, social security & tax
refunds Direct Debits: mortgage payments, utility
The Reserve Banks & the EPN (Electronic Payment Network) edit & sort payments and deliver payments as an ‘interoperator’ between banks.